Henry Jones delivered the good news in a conference call with Tri Energy Inc.’s investors: The gold deal the company had been working on for years was about to pay off.
Jones, 55, a record producer in Marina del Rey, California, and his two partners had raised more than $50 million from 735 investors, which they said they were using to broker the sale to Arab buyers of 20,000 tons of gold owned by a group of Israelis. They promised to triple investors’ money — if only Tri Energy could overcome some last-minute glitches.
All the company needed to close the deal, Jones said on the Dec. 20, 2004, conference call, taped by one of the participants, was a “safe-passage letter” that would cost $450,000. A few days later, on another call, he said Tri Energy had to come up with $100,000 to open a “commission account.” Then, on Jan. 15, 2005, a new request: The bank handling the deal wanted $125,000 to conduct an audit.
This is nothing more than the old pigeon drop con. That is:
[blockquote]Pigeon drop is a confidence trick in which a mark or “pigeon” is convinced to give up a sum of money in order to secure the rights to a larger sum of money, or more valuable object.[1] In reality the scammers make off with the money and the mark is left with nothing.I[/blockquote]
[i] Comment removed by elf. Commenter is warned about appropriate content. [/i]
Alfonso, that’s completely uncalled for. Shame on you.
paradoxy,
/sarc? or /no sarc?
[i]Ned Hill, a professor of business management and a former dean of the Marriott School of Management at Brigham Young University in Provo, Utah, says Mormons have a history of being victimized by financial scams. [/i]
LOL. Yes, Joseph Smith’s Kirtland “Anti-Bank” scam among them.
Anyone can be a victim. The psychology is fascinating. A while back I met a number of fraudsters and victims through regulatory and court proceedings. I came to the conclusion that the best fraudsters weren’t. That is they genuinely did not believe they were defrauding people. There was a split personality, part of which lived the lie of the successful businessman with all the trappings; who could sell believing in the product, because he genuinely did. [Quite often the individual had been on these controversial selling courses where this ability to believe in and sell a product is promoted with messianic zeal and high pressure psychological techniques akin to brain-washing]. The other part of the promotor’s personality could run the second set of books, siphon off funds, rob Peter to pay Paul, and lie through his teeth. When caught and faced with evidence of the fraud there was genuine shock and denial, to the extent of claiming that the money would all be repaid as the ‘investment’ was about to yield fabulous dividends.
The investors are equally interesting. Flattered by the attention of someone who is apparently successful who becomes their friend, entertains them and invites them into a world they have only dreamt of and as a sign of that friendship offering an entry into the financial success which is clearly their due. Common sense is suspended. Implausible returns on investment or something for nothing seems to be reasonable. When interviewed afterwards these investors often say the promotor is the most honest man they have ever met. When told about the fraud the reaction is disbelief followed by anger at such a suggestion. When the penny finally drops the investor turns with rage, not on the promotor of the scheme who has defrauded them, but on those who have burst the bubble.
Tell-tale signs:
1. Why me? retired? with a pension fund or savings? should be the first questions asked.
2. Am I really so special that suddenly a world to which I did not think I had access suddenly comes within reach, a world which has nothing to do with my current life or former occupation.
3. Flashy spenders and high livers should ring all the warning bells, particularly if they want to manage your money.
4. An old adage but true none the less: if the return being offered seems too good to be true it probably is.
5. Invariably a fraudster will insist that your investment will only work if kept secret; in particular you are warned off contacting counter-parties. Never accept this – always run it by your lawyer and accountant and stock-broker and friends whose judgment in financial matters you respect.
6. Often the scheme involves the investor in subterfuge regarding authorities: things carried in a diplomatic bag; a civil servant working for a government agency whose cover must not be blown for the scheme to work, or an invention which is a ‘black box’ which must not be revealed to the market because of the risk of competitors stealing it; similarly third party validation of the scheme or details of the black box never somehow arrives, nor does the auditor’s report. Perhaps the scheme prides itself on not publishing results – something which worried me about a recent carbon-trading investment I noted my church has invested in, although there may be some other benign explanation.
7. If you do not understand how the scheme works, there is probably a reason. Never invest in something you do not understand.
8. If something is being sold to you on the basis of the religious or sporting group you belong to, a school alumni or military service connection or professional grouping, one really has to look at this closely unless it is for example a mutual or co-operative scheme organised by an official grouping for the benefit of members.
9. Avoid investments which do not carry regulatory protection and compensation for investors funds. In most countries, to promote an investment requires registration and regulatory control so never invest except in schemes run by regulated individuals such as banks, stock brokers, insurance companies etc. If necessary check with the regulatory organisation or state officials responsible for regulating investments within that jurisdiction.
10. Finally there really are no get-rich-quick schemes…except for fraudsters.